Tuesday, January 18, 2011

Patterns and cycles - the "W" pattern

2-3 weeks ago I introduced the idea that patterns can be explained with cycles.  I also pointed out we could (hopefully) identify the cycles involved and where they fall on the time line.  I showed you the analysis of an inverted head an shoulders at that time.

Tonite I am going to show you a "W" pattern with annotations showing where the cycle pivots occur.  Here is the pattern:

I have two goals:  1) inform and 2) teach.  GL traders.

8 comments:

  1. W and M patterns are my favorite patterns next to head and Shoulders. If you look this pattern on your chart it has the secondary V to the right of the W. You captured a very bullish pattern. Thanks again Inlet cool to see it match up with a cycle pattern too.

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  2. I have noticed that on that after the peak of a cycle and on the backside (downside) you get extreme highs and of course lows...do you have an explanation for this?

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  3. Shadow -

    If I understand your comment you are saying that following the "W" there was a strong move up. Let's consider this - we have 2 cycles interacting and showing up prominently. This implies that the other cycles are contributing little or nothing at the time. In other words, there is a good chance they are going sideways at the time (for example - at a bottom and turning) and turn UP (or DOWN if topping) after they bottom (or top).

    Hope I understood your point.

    Inlet

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  4. Steelie -

    We learn a lot about a stock and its probable direction by analyzing and parsing the patterns and fitting it to the cyclic action. Enjoy your blog.

    Inlet

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  5. This is all fascinating, really

    Are there cycles in FX? I, for one, could not help but notice there is a clear 8 to 9 week ciclicality in EUR/USD pair. Am i right?

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  6. USIPKA-

    Life is full of cycles - day/night, seasons, tides, lunar, seasons, year. etc, etc. As to the particular cycle you reference - I don' know as I have not looked closely at the EUR/USD, but it would not surprise me if it existed. Whether it is 8, 9 or 10 weeks - my guess would be 10 weeks as that is a common cycle in stocks (but the EUR/USD may be different).

    Yes, there are cycles in FX and FX traders tend to focus on the very short cycles I believe. For longer USD cycles look at Bussiere's charts (charts 8.0 and 8.1 I believe are the USD). His charts URL is in my Blog list.

    If I get a chance I may look at the EUR/USD and post on it.

    Inlet

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  7. USIPKA-

    Some charts on the $.EURO using T-Theory money flow you might find interesting:

    http://position-sizing.blogspot.com/2011/01/short-term-money-flow-ts.html

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